4FRONT VENTURES CORP. 4Front Ventures Reports Third Quarter 2022 Financial Results
Generates $37.3 million in Q3 2022 Systemwide Pro Forma Revenue, representing a 9% increase
from Q2 2022 and 13% from Q3 2021
Q3 2022 Adjusted EBITDA of $9.3 million, an increase of 2% from Q2 2022 and an increase of
24% from Q3 2021
Quarterly performance highlighted by revenue and margin growth in cornerstone market of
Massachusetts
Expecting operating cash flow positive as of December 2022
Conference call to be held today, November 14, 2022, at 5:00 p.m. ET
PHOENIX, Ariz., November 14, 2022 -4Front Ventures Corp.(CSE: FFNT) (OTCQX: FFNTF) ("4Front" or the "Company"), a vertically integrated, multi-statecannabis operator and retailer, today announced its financial results for the third quarter ended September 30, 2022 ("Q3 2022"). All financial information is presented in U.S. dollars unless otherwise indicated.
Q3 2022 Highlights
- Systemwide Pro Forma Revenue totaled $37.3 million representing a 9% increase from the second quarter of 2022 ("Q2 2022") and 13% from the third quarter of 2021 ("Q3 2021")
- GAAP revenue increased 25% year-over-year to $32.5 million
- Adjusted EBITDA increased 24% year-over-year to $9.3 million
- Posted record net sales in Massachusetts, while expanding market share with the launch of four new brands
- Expecting positive operational cash flow by December 2022 as a result of continued operational improvements through fiscal 2022
Systemwide Pro Forma Revenue and Adjusted EBITDA are Non-GAAP measures. See "Note Regarding Non-GAAP Measures, Reconciliation, and Discussion."
Management Commentary
Leo Gontmakher, Chief Executive Officer of 4Front, said: "Over the last twelve months, we have remained focused on executing our winning strategy of replicating operational excellence. Owing to our success in Washington, we have strongly positioned 4Front across our footprint in what we believe to be the best value creation opportunity in the supply chain - as a low-cost, high- quality supplier of cannabis consumer packaged goods."
"Our growth in Massachusetts in the third quarter is a clear example of our strategy coming to fruition, as we capitalized on our low-cost production methodologies to improve the quality of our grow and drive sales volumes across all product categories. This translated into a doubling of the amount of flower we sold quarter-over-quarter, which also provided an added boost to our market share in Massachusetts. Our operations in California and Illinois are also shaping up to be significant growth markets for us heading into the new year. In California, we are seeing continued market share improvements as our customer pipeline grows and existing partnerships expand, and in Illinois, we are focused on increasing our retail footprint as we complete our cultivation expansion at our facility in Matteson."
"Our products and brands are also having a banner year. We launched four new brands in Massachusetts, including Island which has performed exceptionally well among consumers, prompting us to expand our offering to include prerolls and infused prerolls which are expected to launch in the fourth quarter. Additionally, in California, we expanded the Island offering with the launch of Mini Infused Prerolls, which has strengthened our competitiveness in the infused category in this market. We believe the Island line of products will be a solid growth driver for us over the next twelve months."
"Finally, the growth we have fostered over the past year through our unmatched efficiencies and savings has resulted in our expected ability to return to positive operational cash flow by the end of the year. 4Front is an outlier thanks to the automation and scale of our manufacturing facilities and the depth of our product offering, and we believe we have created one of the most nimble and diverse platforms in the industry. I am incredibly proud of our team and what we have built over the last year, and I look forward to continuing the momentum into 2023 with our strong pathway toward sustained growth."
Q3 2022 Operational Highlights
- Posted record net sales growth in 4Front's cornerstone market of Massachusetts, with a near 40% increase in market share from January 2021 and hitting an all-timehigh in the mid-singledigits in Q3 2022. Additionally, the Company significantly grew sales volumes across all categories, including flower, vapes, and edibles. Sequentially, flower volume increased by over 65%, resulting in a quarter-over-quarterincrease of approximately 101% in flower sold in Massachusetts in Q3 2022. Further, 4Front realized an approximate 71% increase in wholesale customers from Q2 2022 to Q3 2022.
- Launched four new brands in Massachusetts, including premier California cannabis brand Island, following 4Front's acquisition of Island Cannabis Co. in April 2022. The Company unveiled 11 new strains of Island packaged flower, produced exclusively for the Commonwealth at its state-of-the-artfacilities. As a result of the early success of the initial launch of Island, the Company plans to introduce pre-rollsand infused pre-rollsin Massachusetts in the fourth quarter of 2022 ("Q4 2022").
- Unveiled National Breast Cancer Awareness Month Campaign for the month of October in partnership with the Pink Gene Foundation and donated $1 from each of 4Front's Pink Gene-markedcannabis products sold at the Company's Mission dispensary retail locations and hundreds of retail locations across California, Illinois, Massachusetts, and Washington. The proceeds raised from this partnership went toward helping women be proactive in the fight against breast cancer by providing education and resources and supporting research.
- On track to substantially complete construction of 4Front's Matteson, Illinois cultivation and production facility in Q4 2022 with operations expected to commence in the third quarter of 2023. In the event 4Front can expedite access to full facility power, operations could commence as early as the second quarter of 2023.
- Expecting positive operational cash flow as of December 2022, as a result of operational success and increased financial discipline.
Subsequent Events
- Added Bloom Farms and Bloom Farms Wellness brands (collectively, "Bloom Farms"), to 4Front's growing portfolio in California. Bloom Farms' cannabis products include vapes and concentrates, while its wellness line offers a hemp-derivedselection of vapes, tinctures, and topicals. The Company will leverage its active partnerships with leading retailers and distributors to further expand availability of the Bloom Farms product offering in California and beyond.
- Rolled-outIsland Mini Infused Prerolls in California in November, further expanding the Company's product offering in the state. Made in small batches, each 10-packfeatures single strain, all-naturalflower infused with highly potent THCA diamonds, available in six premium launch strains, including: Purple Fritter; Alien OG; Papaya Rosé; White Runtz; Blue Dream; and Black Jack. The Island Mini Infused Prerolls are available for purchase at leading dispensaries across California and via delivery through Eaze, the nation's largest cannabis delivery marketplace.
Q3 2022 Financial Overview
Systemwide Pro Forma Revenue for Q3 2022 was $37.3 million, up 9% from Q2 2022 and 13% from Q3 2021. GAAP revenue for Q3 2022 was $32.5 million, up 14% from Q2 2022 and up 25% from Q3 2021. This increase is primarily due to increased revenue in the Company's wholesale revenue as it ramps those portions of its business in California, Illinois, and Massachusetts.
Adjusted EBITDA for Q3 2022 was $9.3 million, up 24% from Q3 2021, representing an Adjusted EBITDA margin of 25%. Continued growth of Adjusted EBITDA and margins is expected to persist
through 2023 as the Company's operations drive increased production and higher sales volumes without material increases to overhead.
As of September 30, 2022, the Company had $5.3 million of cash and $49.5 million of related- party long-term debt not due until May 2024. The Company anticipates an additional $8 to $10 million in non-dilutive cash to be added to the balance sheet before the end of 2022. As of November 14, 2022, the Company has 640,386,686 subordinate voting shares outstanding.
Conference Call
The Company will host a conference call and webcast today, Monday, November 14, 2022, at 5:00 p.m. ET to review its financial and operating results and provide an update on current business trends.
Date: | Monday, November 14, 2022 |
Time: | 5:00 p.m. Eastern Time |
Webcast: | Register |
Dial-in: | 1-888-664-6392 (North America Toll-Free) |
The conference call will be available for replay by phone until November 28, 2022 at 1-888-390- 0541, replay code: 960140#. Additionally, the webcast will be archived for approximately 90 days following the call and can be accessed via 4Front's Investor Relations website. For assistance, please contact IR@4FrontVentures.com.
About 4Front Ventures Corp.
4Front Ventures Corp.("4Front" or the "Company") (CSE: FFNT) (OTCQX: FFNTF) is a national, vertically integrated multi-state cannabis operator who owns or manages operations and facilities in strategic medical and adult-use cannabis markets, including California, Illinois, Massachusetts, Michigan, and Washington. Since its founding in 2011, 4Front has built a strong reputation for its high standards and low-cost cultivation and production methodologies earned through a track record of success in facility design, cultivation, genetics, growing processes, manufacturing, purchasing, distribution, and retail. To date, 4Front has successfully brought to market more than 20 different cannabis brands and over 1800 products, which are strategically distributed through its fully owned and operated Mission dispensaries and retail outlets in its core markets. As the Company continues to drive value for its shareholders, its team is applying its decade of expertise in the sector across the cannabis industry value chain and ecosystem. For more information, visit https://4frontventures.com/.
Financial Statements
4FRONT VENTURES CORP.
Formerly 4Front Holdings, LLC
Consolidated Balance Sheets
As of September 30, 2022 and December 31, 2021
(Amounts expressed in thousands of U.S. dollars except for share and per share data)
September 30, | December 31, | ||||||||||
2022 | 2021 | ||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash | $5,286 | $22,581 | |||||||||
Accounts receivable, net | 8,722 | 1,946 | |||||||||
Other receivables | 20 | 289 | |||||||||
Current portion of lease receivables | 3,765 | 3,630 | |||||||||
Inventory | 30,936 | 20,087 | |||||||||
Current portion of notes receivable | - | 109 | |||||||||
Prepaid expenses and other assets | 2,392 | 2,232 | |||||||||
Total current assets | 51,121 | 50,874 | |||||||||
Property, plant, and equipment, net | 58,697 | 42,633 | |||||||||
Lease receivables | 5,942 | 6,748 | |||||||||
Intangible assets, net | 54,452 | 26,246 | |||||||||
Goodwill | 41,393 | 23,155 | |||||||||
Right-of-use assets | 103,229 | 100,519 | |||||||||
Deposits | 5,165 | 5,364 | |||||||||
TOTAL ASSETS | $319,999 | $255,539 | |||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
LIABILITIES | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $11,303 | $2,131 | |||||||||
Accrued expenses and other current liabilities | 11,620 | 9,411 | |||||||||
Taxes payable | 32,805 | 23,968 | |||||||||
Derivative liability | 8 | 3,502 | |||||||||
Current portion of contract liabilities | 653 | - | |||||||||
Current portion of convertible notes | - | 2,784 | |||||||||
Current portion of lease liability | 3,428 | 3,629 | |||||||||
Current portion of notes payable and accrued interest | 9,299 | 3,413 | |||||||||
Total current liabilities | 69,116 | 48,838 | |||||||||
Convertible notes | 15,513 | 14,641 | |||||||||
Notes payable and accrued interest from related party | 49,422 | 48,266 | |||||||||
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4Front Ventures Corp. published this content on 15 November 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 November 2022 17:01:01 UTC.
